A recent report from the American Petroleum Institute showed that U.S. distillate fuel supplies fell by 1.45 million barrels last week. In reaction to the report, the price of West Texas Intermediate, the crude oil benchmark in the United States, rose to its highest level in seven weeks.

Despite the fact that domestic crude oil production is ramping up, thanks to huge available resources and rapid technological advancements in oil drilling, supplies shrank anyway. The reason for this appears to be that distillate fuels, which include heating oil, are seeing strong demand because of the especially harsh winter in the United States.

Add it all up, and rising oil prices represent a strong tailwind for exploration and production majors like ConocoPhillips (COP -0.02%) and Occidental Petroleum (OXY -0.42%).

Big Oil has the wind at its back
This is especially true for the independent exploration and production majors that are not integrated. Companies like ConocoPhillips and Occidental Petroleum aren't integrated, meaning they focus on upstream activities. Without refining or midstream operations, independent E&P majors will see the full benefit of rising oil prices in their future results.

This is where independent majors have a leg up on their larger, integrated peers during periods of rising oil prices. Integrated energy behemoth ExxonMobil (XOM -0.21%) obviously has a massive upstream segment since it's the biggest energy company in the world. However, ExxonMobil isn't being as aggressive on its production strategy as ConocoPhillips and Occidental Petroleum.

Its overall production fell last year. Moreover, ExxonMobil has a large downstream segment, which includes refining activities. Refining has been a huge anchor on integrated oil and gas companies over the past year because spreads are narrow and margins are thin on refined product sales.

ExxonMobil's profits fell 27% last year, due mostly to such poor performance in its downstream unit. Therefore, even if oil prices rise significantly and help to boost upstream profitability, ExxonMobil's conservative production strategy and huge downstream operations will blunt the positive impacts of higher domestic oil prices.

Why independent E&P majors may outperform
Companies that focus only on upstream exploration and production activities are much more sensitive to fluctuating oil prices than their much bigger, integrated competitors. ConocoPhillips advises investors that for every $1 change in crude oil prices per barrel in the United States, their profits will fluctuate by between $75 million-$85 million. Conceivably, oil climbing $10 per barrel just since the end of the fourth quarter stands to boost ConocoPhillips' earnings by at least $750 million in the current quarter.

Occidental Petroleum will also benefit from rising oil prices, but even more so from its ambitious growth strategy. Occidental grew domestic oil production by 4.3% last year to 266,000 barrels per day. The company plans to increase that even further this year, which will turn out to be a wise decision should oil prices continue to move higher. Occidental intends to grow domestic oil production another 9% in 2014, to between 280,000-295,000 barrels per day.

Occidental's strategy to accelerate production growth from 4% last year to 9% this year demonstrates its long-term bullishness on domestic oil. The decision is even more notable since Occidental projects its domestic gas production to level off or dip slightly. In other words, almost all of Occidental's 2014 overall production growth will focus on U.S. oil.

ConocoPhillips plans to increase production by 3%-5%, which will help its results as well. But you can really see how Occidental's aggressive production strategy could pay off as oil prices climb higher.

Keep an eye on ConocoPhillips and Occidental Petroleum
West Texas Intermediate recently hit $101 per barrel. This represents a fairly strong rally in a relatively short amount of time. West Texas Intermediate was declining toward $90 per barrel just a few weeks ago. This means that all of a sudden, oil exploration and production companies have a strong tailwind heading into the upcoming year.

Integrated majors like ExxonMobil will benefit somewhat, but smaller players that focus entirely on exploration and production will see the biggest payoffs from higher oil prices. That's why ConocoPhillips and Occidental Petroleum have the stiffest tailwinds going forward.